Master Direction – Reserve Bank of India (Certificate of Deposit) Directions, 2021
UR
- Applies toScheduled Commercial Banks, Regional Rural Banks and Small Finance Banks that issue Certificates of Deposit
- StatusIn force
- IssuedJun 04, 2021
- Amendmentsnone tracked
- Length39 points in 3 sections · 4 min read
The four dates on this rule
- PublishedJun 04, 2021The day RBI put this document out. This is the same day as the Issued date on this rule.
- Starts to applyJune 07, 2021The day this rule starts to apply, as RBI's own text states it.
- Time to get ready3 daysThe room between the day it was published and the day it starts to apply.
- Last date to actNot statedNo date to act by was found in this document. Other dates may sit inside single paragraphs.
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Numbers to remember
| one year | A CD is a bank's unsecured promissory note against money it holds, for up to one year. RBI Para 2 |
| Rs 5 lakh | A CD is issued in steps of Rs 5 lakh. RBI Para 5 |
| seven days | A CD lasts at least seven days and at most one year. RBI Para 5 |
| one month | RBI can stop a person or firm from dealing in CDs for up to one month. RBI Para 9 |
What it says
How firm is each point
Stated by RBI — RBI’s own paragraph says this. We have only made it plainer.
Our reading — BankPulse read RBI’s paragraph and shortened it. The paragraph is the authority, not this line.
Needs judgement — RBI leaves this to the bank to settle, so nobody can give you a fixed number here.
Can be read two ways
A point marked this way sits on an RBI paragraph that can honestly be read two ways. Our own sentence takes one of the two. BankPulse does not choose for you: read RBI’s own paragraph, at the number printed on the point, before you act on it.
Two ways — both, or either one. RBI’s paragraph joins two things in the and-or form. One reading: Both of them apply, together. The other: Either one of them, on its own, is enough.
Must know
1. What a CD is
A CD is a bank's unsecured promissory note against money it holds, for up to one year.
2. Which banks may issue CDs
Scheduled Commercial Banks, Regional Rural Banks and Small Finance Banks may issue CDs.
3. Who can buy a CD
A certificate of deposit can be issued to any person resident in India.
4. CDs must be dematerialised
CDs are issued only in demat form, held with a SEBI-registered depository.
5. Minimum size, Rs 5 lakh
A CD is issued in steps of Rs 5 lakh.
BankPulse example. BankPulse example. A bank issuing one CD for Rs 32 lakh rounds the amount to Rs 35 lakh, a multiple of Rs 5 lakh.
6. CD's minimum and maximum tenor
A CD lasts at least seven days and at most one year.
7. Where a CD trades
A CD trades over the counter, ETPs included, or on an exchange with RBI's approval.
8. Resale settles T+0 or T+1
A CD resale settles the same day or the next business day.
9. Resale settles DvP
Every resale of a CD settles funds against securities together.
10. No loans against a CD
A bank cannot lend money against a CD unless RBI allows it.
11. Issuer may buy back CDs
The bank that issued a CD may buy it back before maturity.
12. Buyback waits seven days
A CD cannot be bought back until seven days after it is issued.
13. Same buyback terms for all
A buyback offer must go to every holder of that CD on the same terms.
14. Holder may refuse a buyback
Each investor may accept or refuse the buyback offer.
15. A bought-back CD is cancelled
A CD that is bought back, even partly, is cancelled for good.
16. Trading hours, 9 to 5
CDs trade between 9 AM and 5 PM on a business day.
17. No grace period on repayment
RBI gives no extra time to repay a CD at maturity.
18. RBI can demand information anytime
RBI may ask anyone dealing in CDs for details or an explanation.
19. RBI can bar a dealer
RBI can stop a person or firm from dealing in CDs for up to one month.
20. A hearing comes first
RBI must give the person a chance to defend themselves first.
21. This rule wins over others
If another regulator's rule conflicts with this one, this one wins.
Do it
1. Report issuance the same day
The issuer reports a new CD's issuance by 5.30 PM that day.
2. Report a resale fast
Both sides report a CD resale to F-TRAC within 15 minutes.
3. Report a buyback promptly
The issuer reports a buyback to F-TRAC by 5.30 PM that day.
4. Depositories report CD holdings fortnightly
Depositories tell RBI what CDs they hold, twice a month.
Background
1. Called the 2021 Directions
This rulebook is RBI's 2021 Directions for Certificates of Deposit.
2. Started 7 June 2021
This rule started on 7 June 2021.
3. What a Bank means here
Bank includes a Payment Bank and a Small Finance Bank, among others.
4. What Delivery versus Payment means
In DvP, the buyer's funds and the seller's securities move at the same time.
5. What a Depository is
Depository has the same meaning as in the Depositories Act, 1996.
6. What an ETP is
An Electronic Trading Platform takes its meaning from RBI's 2018 ETP Directions.
7. What OTC markets means
OTC markets cover deals not done on an exchange, ETPs included.
8. What counts as an SFB
A Small Finance Bank is licensed under the Banking Regulation Act, 1949.
9. AIFIs follow a separate rule
All India Financial Institutions follow a separate 2015 RBI master circular instead.
10. CDs issue T+1
A CD is issued the day after its offer period ends, on a T+1 basis.
11. Discount or coupon pricing
A CD may be sold at a discount to its face value.
12. RBI may publish CD data
RBI can publish anonymised data on primary and secondary CD trades.
13. RBI may make it public
RBI can also make the ban public.
14. Old CDs keep old rules
A CD issued under the old 2016 rule stays on that rule until it matures.